Global Competition Law is primarly a practitioner's guide presenting the most salient aspects of the major competition laws country by country, giving an overview of their structure and most charasteristic elements.
Global Competition Law also provides insight into possible future developments in the field.

Global Competition Law

Chapter 4 of the AML governs “concentrations of business operators”. In the past two years, the AML has been supplemented by various SAMR guidance papers - which amend the guidelines adopted by the MOFCOM, the authority previously in charge of merger control.

In 2022, the AML was amended and the new version has come into effect on 1 August  2022. It brought a number of major changes and additions …

Context

Chapter 4 of the AML governs “concentrations of business operators”. In the past two years, the AML has been supplemented by various SAMR guidance papers - which amend the guidelines adopted by the MOFCOM, the authority previously in charge of merger control.

In 2022, the AML was amended and the new version has come into effect on 1 August  2022. It brought a number of major changes and additions. The SAMR is now called “Anti-monopoly Law Enforcement Agency of the State Council”. This book uses the numbering of the amended AML but may use the word SAMR for reasons of convenience.

Article 25 of the AML defines “concentration of undertakings” as:

(2) acquiring control over other undertakings by acquisition of equities or assets;

(3) acquiring control over other undertakings or possibility of exercising decisive influence on other undertakings by virtue of contract or any other means.

The concepts of “control” and “decisive influence” are not defined by the law.

The SAMR's Guiding Opinions on notification of concentrations between business operators fill this gap. According to the SAMR, acquisition of de facto control may give rise to a concentration and thereby, where assessing the existence of control, the authorities should take into account the parties' agreement and the target's articles of association and especially:

i) the aims of the transaction and the parties' future plans;

ii) the structure of third parties' shareholdings in the target before and after the transaction;

iii) the matters to be discussed in the target's general shareholders meeting, its voting rules, past attendance rates and voting results;

iv) the composition of the target managing bodies and their voting rules;

v) the rules relating to the appointment and removal of senior managers in the target;

vi) the relationship between shareholders and between managers of the target;

vii) the business relationship or cooperation agreements between the parties.

The Guiding Opinions also address the concepts of sole or joint control, especially for the purpose of defining the notification obligation of joint-ventures. Henceforth, the establishment of a joint-venture should be notified where it is jointly controlled by its shareholders but not where it is solely controlled by one of them.

Concept of concentration

Pursuant to the Regulations on Filing Thresholds for Concentration of Business Operators (the "Filing Thresholds Regulations"), the undertakings involved in the merger must notify firstly if the combined worldwide annual turnover of all business operators involved in the preceding fiscal year exceeds CNY 12 billion (US$ 1,7 billion) and at least two of the undertakings have an annual turnover in China exceeding CNY 800 million (US$ 113,5 million).

Secondly they must notify if the combined Chinese annual turnover of all business operators involved in the concentration in the preceding fiscal year exceeds CNY 4 billion (US$ 567,6 million), and at least two of the business operators having an annual turnover in China exceeding CNY 800 million (US$ 113,5 million).

These thresholds came into force with China's State Council new Regulation on the Notification Thresholds for Concentrations between Undertakings, that entered into force with immediate effect on 25 January 2024.

The Guiding Opinions on notification of concentrations between business operators clarify the scope of the turnover requirements contained in the notification threshold rules. They specifiy that turnover realized in the territory of China includes imports but excludes exports. Although taking account of an undertaking's subsidiaries, it also excludes the turnover of undertakings it sold or of which it lost control during the preceding accounting year. Likewise, in the case of a partial sale of assets or equity, the turnover taken into account is not that of the seller but that generated by the assets or that of the target where the transaction leads to the seller's loss of control.

Moreover, under Article 26 of the AML, the Anti-monopoly Law Enforcement Agency of the State Council may require a declaration and antitrust review of concentration even if they do not fall below the threshold, if “there is evidence proving that the concentration has or may have effect of eliminating or restricting competition”. This addition is the result of cases where companies have been able to avoid antitrust review due to not having high turnover. 

The 2024 Thresholds Regulation allows SAMR to review and propose adjustments to the merger control thresholds based on the state of economic development, for example by reference to inflation or GDP growth.

Article 27 provides for some exceptions to the notification obligation where: 

“(I) one undertaking participating in the concentration holds more than 50% of the voting shares or assets of each of the other undertakings; or (II) more than 50% of the voting shares or assets of each of the undertakings participating in the concentration is held by an undertaking not participating in the concentration”.

Thresholds

The decision is taken on the basis of factors including the market share of the business operators, the degree of market concentration, the influence of the concentration on access to the market and technological progress, the influence of the concentration on consumers and other undertakings and on the development of the national economy and other considerations identified by the SAMR (Article 33 AML).

If the operation has or may have the effect of eliminating or restricting competition, the SAMR may prohibit the concentration. However, the undertaking may prove that the operation will bring positive impact on competition (Article 34 AML).

If a foreign undertaking is concerned by the acquisition of a domestic undertaking, this operation will be submitted to a national security assessment (Article 38 AML).

Finally, China’s central market regulatory authority has also published guidelines for the review of horizontal mergers, clarifying the criteria used to assess such transactions.

Global Competition Law

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Les notions juridiques connexes

927. Context

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Les notions juridiques connexes

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au contenu exclusif Livv – juristes d’entreprise